Lloyds TSB stung by bad debts

LONDON, England (CNN) -- Lloyds TSB Group, Britain's third-biggest bank, said profit slipped as it was forced to set aside money for bad debts related to two U.S. corporations and Argentina.

Net income slipped 1.6 percent to £1.11 billion ($1.74 billion) in the six months to June 30, from £1.13 billion in the first-half of last year. Earning per share slipped to 19.3 pence from 20.3 pence, the bank said.

At the pretax level, profit rose by £1 million to £1.6 billion, while analysts polled by Reuters forecast earnings in the £1.489 billion to £1.787 billion range.

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Lloyds TSB raised its provisions for possible loan defaults by £70 million to cover losses from two U.S. companies, one of which is believed to be bankrupt energy trader Enron, according to Reuters. Total provisions for bad debts jumped 48 percent to £479 million.

Its stock (LLOY), which fell more than 20 percent this year, fell more than 2.5 percent to 571 pence in early London morning trading on Thursday amid concerns about its debt provisions and outlook for the remainder of the year.

"Whilst our operating environment is likely to remain difficult throughout the second half of the year, particularly for our equity market sensitive businesses, we expect the group to continue to make progress,'' Chairman Maarten van den Bergh said.

The bank, which has focused its operations on providing facilities for consumers and companies, has also been hit hard by slumping stock markets through its life assurance business, Scottish Widows. But it said its capital position remained satisfactory.

But the bank is not alone in increasing its bad debt provisions. Barclays, Britain's fourth-biggest bank, said profit fell 5.6 percent as it set aside money for Argentina's economic crisis.

And Deutsche Bank, Germany's biggest, doubled the amount of money it expected to lose to 588 million euros mostly associated with a string of bankruptcies, including WorldCom.

Lloyds Chief Executive Peter Ellwood told Reuters the banks total exposure to Argentina stood at £270 million.